The Below Market Value (BMV) marketplace is of course encompassed within BTL.  It was no surprise last year when it became obvious the FSA wants control over this commercial market sector.  What perhaps was surprising was just how long it had taken for the FSA to make noises about do so.

The recent Consultation Paper (see www.fsa.gov.uk) sets out the FSA's intention to regulate the BTL sector, so we thought we would offer our comment as to what investor and intermediary could reasonably look forward to.

A Little History ... Until the late eighties the UK financial services industry remained entirely self-regulated and for decades those companies and independent intermediaries in business for the long-term behaved accordingly. The few, in it for fast-buck, also behaved 'accordingly' with this minority not too difficult to spot as their products and services tended to offer unreasonable returns when compared to the majority others.  In short, if someone chose to ignore the evidence, they could and often did lose their shirt!   

In the late eighties the leading financial institutions got together to oust the activities of the less scrupulous and formed various, dedicated regulators.  For residential mortgages the regulator became the Mortgage Code Compliance Board (MCCB) who monitored and controlled the sale of 'residential' mortgages (not commercial mortgages i.e. BTL), and they did this well at reasonable costs to those who lawfully practiced in that marketplace.   

But Government, in the guise of the FSA, effectively highjacked these independent regulators more than a decade later.  Initially, and speaking of the MCCB, 'membership' fees remained tolerable: thousands of small mortgage intermediaries could worked happily offering services to familiar clients whilst paying his or her business overhead and authorisation fees, enjoying a good income and local reputation.  

During the past few years since the rule of the FSA, member fees have rocketed and many small businesses have been forced out of the industry.  And, as the past two years have demonstrated, effective FSA regulation of the Banks has been somewhat disappointing (just thought I'd mention it!).   

However, regulation is nothing to fear for the reputable investor, mortgage intermediary or lending institution as it is designed at least to limit if not erradicate the improper practices of the debious minority who exist in all unregulated professions.  We only have to think back 100 or so years to when teeth were pulled by our barber!.  In short, if one is behaving honorably and ethically in any field of endeavour, regulation should be a healthy business partner.

Our concern, shared by many other industry professionals, is that costs under FSA/BTL regulation will escalate and it will be you, as the investor, who will ultimately foot the bill!

We expect the FSA to absorb the BTL sector, and with it BMV activities, within the next 18-months or so and whereas BMV deals will probably remain available at competitive market prices, the total cash investment per deal will inevitably be higher, some say even double today's prices.

In A Nutshell ... do not put off your BMV property acquisition too long, if you really want the bargains available today!

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